FortuneScript Union Budget 2018-19: Expectations

On February 01, 2018, the Finance Minister Arun Jaitley will unveil the Union Budget 2018-19. This budget is very significant for the Modi government, as it is the first budget post GST and the last full budget before the general election in 2019. To appease the voters, government may announce some populist schemes. However, government may not want to shatter the image of a reformist government. Therefore, we expect Budget 2018-19 to be a right mix of populism and reforms.

As the government is expected to miss the Revenue and Expenditure budgeted estimates, we expect government to miss the fiscal deficit target of 3.2% in FY18. For FY19, the government may increase the fiscal deficit target to 3.2% from 3% to boost the economy.

We estimate the FY18-19 budget to spur public spending on infrastructure (roads, power, irrigation and railways), rural development and agriculture since the government is committed to double farm income by 2022.

We expect a host of measures such as increase in tax exemption limit for the salaried class in order to please the middle class.

There are rumors that the government is thinking of taxing long term capital gains from equity investments. Market sentiment may dampen if the government raises the long term capital gain tax definition beyond current one year period or taxes the long term capital gains.